Question

As a result of a thorough physical inventory, Railway Company determined that it had inventory worth $180,000 at December 31. This count did not take into consideration the following facts: Rogers Consignment store currently has goods worth $35,000 on its sales floor that belong to Railway but are being sold on consignment by Rogers. The selling price of these goods is $50,000. Railway purchased $13,000 of goods that were shipped on December 27, FOB destination, that will be received by Railway on January 3. Determine the correct amount of inventory that Railway should report.

Answer 1

$215,000.

Step-by-step explanation:

An inventory report is a summary of items belonging to a business, industry, or organization. The physical inventory must be done in all of the locations where the firm has stocks.

If the company send inventory to a retailer as consignment, invoicing doesn’t occur until that retailer has sold said inventory. While the inventory is in the retailer’s store, the company still own it and that needs to be reflected on your Balance Sheet.

In this case, the correct amount of inventory that Railway should report is:

$180,000 of physical inventory worth + $35,000 Rogers Consignment store currently goods worth = $215,000 inventory that Railway should report.